How Property Brothers Turned $ 250 to $ 50,000 on Their First Flip.
TV shows can turn around – when an investor buys houses and sells them quickly for profits – look easy.
Not so fast, say experts and flippers alike.
"There are many moving parts in the house that flash with serious financial consequences if you overlook something," says Audra Walters, real estate agent at Front Porch Properties in Charleston, South Carolina. "If you do not get a good estimate for renovation or do not ensure proper permission, it can lead to delays and lead to big losses."
For Jerryll North, a former NASA robotics researcher who now flips three to four houses at a time through his Connecticut real estate company, the hardest part was finding finance for buying properties.
"Asking other people, including lenders, for money was a terrible thought," said North, who began flipping houses in 2016. "I found an investor forum online and asked," If I find an agreement below market value, someone interested in paying for house and repair expenses and we share the profits? ""
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While most laughed at the thought, an investor agreed. Eventually, they made a $ 80,000 result despite the repair costs, and the project took 11 months to complete.
House flipping can be lucrative when done right. Here are some steps to increase the chances of a successful flip.
Studying the Market
The best opportunities are found outside the market and outside websites called Multiple Listing Services (MLS), where brokers can list and see properties for sale, advises Nathaniel Butler, marketing manager at Washington Capital Partners in Falls Church, Virginia.
"These properties can be found using platform retailers, wholesalers (people who find a property, get it under contract, and assign it to another buyer who closes it), flip contractors, and by running for dollars through neighbors with emergency properties.
Don't be afraid to engage an agent as well.
Find an agent who understands the local real estate market, takes the time to educate you, and can recognize a good opportunity, Robin says. Kencel, a real estate agent for Compass in Greenwich, Connecticut. "Understanding what the market will carry for the property at that location is the key to a successful flip."
Ask other investors if they know of any agents who have experience working with house flippers The upside for agents, says Kencel, are those who provide brilliant and knowledgeable business advice, are well positioned for a long-term relationship with the investor when buying and selling properties.
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Avery Carl, a real estate agent in Nashville, Tenn., Flipper house and scours neighborhood to find properties below market value
"Look for houses that are not well maintained with cracked windows, peeling paint and greenery," Carl says. .
Finally, she bought and flipped six properties in a few years, and bought "lipsticks" that only needed carpet and paint. Her strategy? Buy a $ 100,000 house, add $ 40,000 – $ 50,000 in value, flip it and net $ 15,000 – $ 20,000 in profit.
Timing is key, says Kencel, Connecticut broker: "See during the holidays, at the end of the year and in the summer," periods when fewer people hunt for houses. "Keep an eye on the ball when others look elsewhere."
Put a budget and timeline
The North states that first-time flippers must understand the cost of the entire transaction, plus the value of the house when the repairs are made.
"People are losing money closing costs, lending costs, seller's agent fees, keeping costs, emergency costs, tools, building and rehabilitation costs, and more," he explains. "To take these costs into account, you need to buy the house at the right price."
That means finding out after the repair value (ARV), which "is the expected value of the house after it is completely renovated, says Noorden.
Many buyers use what is called the 70% rule.
Stefano Grottoli of Orange Sun Investments in New Jersey offers this example: "If the house you want to buy will be worth $ 200,000 after it's rebuilt and you have to spend $ 50,000 to rehab it, then you won't pay any more  Let's do the math:
$ 200,000 (ARV) X 70% = $ 140,000
$ 140,000 (70% of ARV) – $ 50,000 (Repairs) = $ 90,000 (Maximum Purchase).
"Of course, your first offer will be much less than $ 90,000, but even at that price, you're on your way to making good if no other issues arise," says Grottoli. "A good contractor can help you fix repair costs, but be sure to hire an inspector before buying to see if there is black mold, termite damage, an underground oil tank or ground damage. "
You must also set a timeline.
Manage your team
Rehabbing a property is a complicated business, hiring a team of experts on each project, including an architect, contractor, inspector, lender, CPA, real estate agent and real estate agent, although you have these experts on your side, remember, Are you responsible.
"Give contractors a detailed scope of work, with a budget per item and deadlines for each phase of completion," says Grottoli. "Never ever give more than 10% down before it actually The work begins and does not leave the house of the contractors. Always monitor their work. "
Not aware of over-improvements
That's the number 1 error many first-time flippers," says Carl, the Nashville broker, who also buys and owns properties. "Does a" B "neighborhood provide the most expensive marble counter tops? No, a nice looking solid surface count is good, she says. In addition, Carl says not to be emotionally linked to a property.
"Do what needs to be done to get the value of the property," she says. But don't make it a vanity project. "
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